White House looks past conservatives on tax reform - to Democrats

U.S. President Donald Trump attends a meeting with truckers and CEOs regarding healthcare at the White House in Washington, U.S., March 23, 2017.Carlos Barria/Files

WASHINGTON (Reuters) - Fresh off a defeat on U.S. healthcare legislation, the White House warned rebellious conservative lawmakers that they should get behind President Donald Trump's agenda or he may bypass them on future legislative fights, including tax reform.

The threat by White House chief of staff Reince Priebus to build a broad coalition on tax reform that could include moderate Democrats came as the Republican head of the tax-writing committee in the House of Representatives said he hoped to move a tax bill through his panel this spring.

House Ways and Means Committee Chairman Kevin Brady said his committee had been working on tax reform in parallel with the failed healthcare reform push.

Brady said the committee planned to move on the bill in the spring. He said he wanted the House blueprint to be the basis for Trump's tax reform plan rather than have competing versions from Treasury and the White House.

Investors on Wall Street worry the healthcare bill's defeat bodes poorly for tax reform. Equities have rallied since Trump's election partly on expectations of tax cuts. Economic growth would be more modest without fiscal stimulus and U.S. equity index futures fell to a six-week low on Sunday.

Both Trump and Priebus have scolded hardline conservatives who rejected legislation backed by the White House to replace the 2010 Affordable Care Act, known as Obamacare.

Speaking on "Fox News Sunday," Priebus held out the possibility of working with moderate Democrats as well as Republicans to pass other aspects of Trump's agenda, such as his proposed budget, the revamp of the tax code and a renewed effort at healthcare reform.

"If we can come up with a bill that accomplishes the goals of the president with Republicans alone, we'll take it and we'll move forward with it," Priebus said.

But he added: "I think it's more or less a warning shot that we're willing to talk to anyone. We always have been and I think more so now than ever."

In an embarrassment for Trump, who had campaigned for the White House on what he said were his skills as a dealmaker, the healthcare bill was pulled from the floor of the House of Representatives on Friday because it failed to draw enough support from within Trump's Republican Party.

Objections from members of the conservative House Freedom Caucus and from moderate Republicans left leaders short of the votes needed for passage, with Democrats unified in opposition.

Trump failed to win over the Freedom Caucus lawmakers despite courting them intensively. Outside conservative groups such as the Club for Growth and Heritage Action for America that are closely aligned with the Freedom Caucus had strongly opposed the Republican healthcare bill and urged lawmakers to reject it.

In a tweet on Sunday morning, Trump lashed out at both the Freedom Caucus and the conservative groups, saying their actions had left "Democrats smiling in D.C."

White House Chief of Staff Reince Priebus listens during a joint news conference held by German Chancellor Angela Merkel and U.S. President Donald Trump in the East Room of the White House in Washington, U.S., March 17, 2017.Jim Bourg/Files

Priebus said it was a "real shame" that conservative lawmakers decided not to get behind the healthcare bill.

"And I think the president is disappointed in the number of people he thought were loyal to him that weren't," he said.

MIDDLE-CLASS TAX CUT

Trump has put tax reform at the top of his legislative agenda now that the healthcare bill has failed.

Priebus said Trump was not backing off his view that the tax reform bill needed a border tax. He also said that the measure would include a middle-class tax cut that he said might help to attract votes from moderate Democrats.

White House Chief of Staff Reince Priebus and Chief Strategist Steve Bannon arrive for a meeting about the American Health Care Act on Capitol Hill in Washington, D.C., U.S. March 23, 2017.Aaron P. Bernstein

In a sign that not everyone in the Freedom Caucus was in line with its approach and a positive signal for Trump as he looked ahead to tax reform, U.S. Representative Ted Poe, a Texas Republican, said he had resigned from the group.

"In order to deliver on the conservative agenda we have promised the American people for eight years, we must come together to find solutions to move this country forward," Poe said in a brief statement. "Saying no is easy, leading is hard."

Senate Democratic leader Chuck Schumer criticized Trump over his handling of the healthcare bill and said Republicans would face roadblocks from conservatives on other issues.

"They're going to repeat the same mistake they made on Trumpcare with tax reform," Schumer told ABC's "This Week."

He urged Trump to go a different path: Reject the Freedom Caucus and work with Democrats.

"If he changes, he could have a different presidency," Schumer said. "He's going to have to tell them he can't work with them and we'll certainly look at his proposals. But it's going to be guided on our values."

Republican Representative Mark Meadows, chairman of the Freedom Caucus, said on Sunday he was optimistic on tax reform and that his group could support a plan that is not revenue neutral.

"So, tax reform and lowering taxes, you know, will create and generate more income," he said. "And so we're looking at those, where the fine balance is. But does it have to be fully offset? My personal response is 'no.'"

Another Freedom Caucus congressman, Jim Jordan, rejected fingerpointing over the collapse of the health bill.

"Instead of doing the blame game, let's get to work," he said on "Fox News Sunday."

Additional reporting by Jessica Toonkel and Jennifer Ablan in New York; Writing by Caren Bohan; Editing by Andrew Hay and Peter Cooney